Workers' Compensation

Workers' compensation is a state-mandated insurance system that covers medical expenses and a portion of lost wages when an employee is injured or becomes ill because of their job.

In exchange for that coverage, employees generally give up the right to sue their employer directly for the injury, a trade-off known as the exclusive remedy rule.

Which Employers Are Required to Carry Workers' Compensation Insurance?

Requirements are set at the state level, not federally, and vary in both the employee-count threshold and which industries are covered.

Most states require coverage starting with just one or a handful of employees, and a few states carve out exceptions for specific industries like agriculture or domestic work. OSHA requirements around workplace safety run alongside these state insurance rules, not in place of them.

What Does Workers' Compensation Actually Cover?

• Medical treatment directly related to the workplace injury or illness
• A portion of lost wages while the employee can't work, typically around two-thirds of average pay
• Disability benefits if the injury results in permanent impairment
• Death benefits and funeral costs in the case of a fatal workplace incident

What Should Happen Immediately After a Workplace Injury?

How Should Employers Reduce Workers' Compensation Costs?

SHRM and workplace-safety researchers consistently find that a genuine, well-supported return-to-work program lowers both cost and claim duration compared to leaving an injured employee out entirely until full recovery.

Tracking injury reports, leave, and return-to-work status inside a single HRIS keeps the whole process visible instead of scattered across paper forms and separate insurer systems.

• Invest genuinely in workplace safety training reinforced through good onboarding and hazard reduction, not just paperwork
• Report and process claims quickly, since delays tend to increase both cost and litigation risk
• Offer light-duty or modified-duty roles where medically appropriate, to support a faster return to work
• Review claims data periodically to spot patterns pointing to a specific hazard or process issue

How Does Workers' Compensation Interact With Other Employee Leave?

A workplace injury can trigger workers' compensation, FMLA leave, and ADA accommodation obligations at the same time, each with its own separate rules and timelines.

Coordinating these through time-off tracking and clear manager communication avoids the common mistake of treating an injury as only a workers' comp matter when it may also require an accommodation conversation.

This overlaps with several other entries in HR Cloud's HR glossary, particularly reasonable accommodation and unemployment insurance.

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Frequently Asked Questions

Q: Can an employee be fired while on workers' compensation?

A: Generally an employer can't terminate someone specifically for filing a workers' comp claim, but termination for unrelated, legitimate reasons is usually still permitted, subject to state-specific protections.

Q: Does workers' compensation cover remote employees?

A: It can, if the injury genuinely arose out of and in the course of employment, though proving that connection is often harder for home-based injuries than for an on-site incident.

Q: Is workers' compensation the same as short-term disability?

A: No. Workers' compensation only covers job-related injuries and illnesses; short-term disability typically covers a broader range of medical conditions regardless of cause.

Q: What happens if an employer doesn't carry required workers' compensation insurance?

A: Penalties vary by state but can include significant fines, personal liability for the employer, and in some states, criminal charges.

Q: Can an employee choose their own doctor for a workers' comp injury?

A: It depends on the state; some allow free choice of provider, while others require using an employer-designated network, at least initially.